Renewed U.S. sanctions target Iran's economy, Tehran cool on talks

WASHINGTON/ANKARA (Reuters) - President Donald Trump’s top security adviser on Monday urged Iran to take up an offer of talks with the United States or suffer more pain from economic sanctions, but Iran’s president said Washington needed first to prove it can be trusted.

Hours before revived U.S. sanctions were due to kick in, White House national security adviser John Bolton said Iran should pay heed to Trump’s willingness to negotiate.

“They could take up the president’s offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably,” Bolton told Fox News.

“If the ayatollahs want to get out from under the squeeze, they should come and sit down. The pressure will not relent while the negotiations go on,” said Bolton, one of the administration’s main hawks on Iran.

So-called snapback sanctions, due to come into force early on Tuesday, target Iranian purchases of U.S. dollars, metals trading, coal, industrial software and its auto sector.

Foes for decades, the United States and Iran have been increasingly at odds over Iran’s growing political and military influence in the Middle East since Trump took office in January 2017.

The renewed sanctions were among those lifted under a 2015 deal between world powers and Tehran on curbing Iran’s nuclear program. Trump abandoned the deal in May. Heavier U.S. sanctions, aimed at Iran’s oil sector, are due in November.

Iran’s rial currency has lost half its value since April under the threat of revived U.S. sanctions. The currency’s collapse and soaring inflation have sparked sporadic demonstrations in Iran against profiteering and corruption, with many protesters chanting anti-government slogans.

President Hassan Rouhani on Monday said Iran could hold talks with the United States only if Washington proved its trustworthiness.

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Rouhani implied that if the United States signed up again to the nuclear deal and lifted sanctions, then that could pave the ground for negotiations.

“If you stab someone with a knife and then you say you want talks, then the first thing you have to do is remove the knife,” Rouhani said in a speech broadcast live on state television.

“We are always in favour of diplomacy and talks. ... But talks need honesty,” Rouhani said. He called on Iranians to unite in the face of hardship. “There will be pressure because of sanctions, but we will overcome this with unity,” he said.

Trump pulled the United States out of the nuclear deal, saying it fails to address Iran’s ballistic missile program, the terms by which inspectors visit suspect Iranian nuclear sites, and “sunset” clauses under which some of its terms expire.

The two countries are also in dispute over Iran’s involvement in Middle Eastern conflicts from Yemen to Syria and tensions between Tehran and Israel.

SANCTIONS WEAK SPOTS

Trump plans to reintroduce more damaging sanctions on Iranian oil in November and wants as many countries as possible to cut their imports of Iranian oil to zero.

But the U.S. sanctions strategy has several weak spots, especially a reluctance by Europe and China to curtail business with Iran.

The European Union voiced regret on Monday at the looming U.S. sanctions.

A senior official at Iran’s economy ministry said Tehran did not think the economic impact of the sanctions would be “massive.”

“Many countries, including Europeans, disagree with the U.S. sanctions and are willing to work with Iran,” said the official, who asked not to be named.

Iran said on Sunday it will ease foreign exchange rules, to try to halt the fall of its currency.

Iran’s net official reserves are projected to decline this year to $97.8 billion, enough to finance about 13 months of imports, the International Monetary Fund estimated in March.

The sanctions aim to modify Iran’s behaviour and not bring about a “regime change” targeting Rouhani, U.S. officials said on a conference call on Monday. They said the government’s handling of social and labour protests was a concern.

Fear of sanctions and economic hardship have led to sporadic protests in several cities in recent days, with ordinary Iranians chanting slogans against Iranian leaders.

Trump warned on Monday of “severe consequences” for people or entities that fail to wind down economic activities with Iran.

“The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance,” he said in a statement.

The European Union vowed on Monday to counter the renewal of sanctions on Iran.

The EU and other parties to the 2015 nuclear deal, China and Russia, are working to maintain trade with Iran, which has threatened to stop complying with curbs on its nuclear work if it fails to see the economic benefits of relief from sanctions under the deal.

“We deeply regret the reimposition of sanctions by the U.S.,” the bloc said in a joint statement with the foreign ministers of France, Germany and Britain.

FILE PHOTO: U.S. President Donald Trump speaks to reporters after signing a proclamation declaring his intention to withdraw from the JCPOA Iran nuclear agreement in the Diplomatic Room at the White House in Washington, U.S. May 8, 2018. REUTERS/Jonathan Ernst/File Photo

They pledged to work on preserving financial flows and Iran’s oil and gas exports - a lifeline of its economy.

Reporting by Lesley Wroughton, Doina Chiacu and Lisa Lambert in Washington and Robert-Jan Bartunek and Alissa de Carbonnel in Brussels, and Parisa Hafezi in Ankara; Writing by Alistair Bell; Editing by Howard Goller, James Dalgleish and Jonathan Oatis